New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Mixed is how we would describe our feelings heading into The a2 Milk Company's (ATM) FY25 result.</li><li>Looking to FY26, with (1) a strong 2H exit run-rate, and (2) larger impact of a2 Genesis HMO, our earnings are slightly ahead of consensus.</li><li>We think valuation is slightly elevated at current levels, but countering that we are comfortable with consensus' outlook and are balancing the possible near-term catalysts of (1) supply chain acquisition (which could be announced at any moment), and (2) capital management opportunities.</li></ul>

Mixed is how we would describe our feelings heading into The a2 Milk Company's (ATM) FY25 result.Looking to FY26, with (1) a strong 2H exit run-rate, and (2) larger impact of a2 Genesis HMO, our earnings are slightly ahead of consensus.We think valuation is slightly elevated at current levels, but countering that we are comfortable with consensus' outlook and are balancing the possible near-term catalysts of (1) supply chain acquisition (which could be announced at any moment), and (2) capital management opportunities.

The A2 Milk Company Wheying Up The Investment Case

<ul><li>There was little to fault in The a2 Milk Company's (ATM) 1H25 result.</li><li>English Label (EL) revenue—particularly CBEC—stole the show, driven by strong execution in lower-tier cities and early-stage products, along with an improving market backdrop.</li><li>Increased earnings guidance implies a 2H25 EBITDA margin of 15.0%–15.5%, marking the first genuine margin expansion since pre-COVID and likely strengthening confidence in the margin outlook. </li></ul>

There was little to fault in The a2 Milk Company's (ATM) 1H25 result.English Label (EL) revenue—particularly CBEC—stole the show, driven by strong execution in lower-tier cities and early-stage products, along with an improving market backdrop.Increased earnings guidance implies a 2H25 EBITDA margin of 15.0%–15.5%, marking the first genuine margin expansion since pre-COVID and likely strengthening confidence in the margin outlook. 

The A2 Milk Company - 1H25 Result—More than Baby Steps

<ul><li>We head into The a2 Milk Company's (ATM) 1H25 result not expecting any surprises relative to consensus expectations or company guidance.</li><li>This is a brave ascertation to make given ATM's track record on result days, but the (still) pending supply chain acquisition/JV is the main area of possible surprise.</li><li>Key focus areas are: (1) supply chain updates, (2) China Label (CL) revenue, and (3) the English Label (EL) outlook in light of the new Genesis HMO product release.</li></ul>

We head into The a2 Milk Company's (ATM) 1H25 result not expecting any surprises relative to consensus expectations or company guidance.This is a brave ascertation to make given ATM's track record on result days, but the (still) pending supply chain acquisition/JV is the main area of possible surprise.Key focus areas are: (1) supply chain updates, (2) China Label (CL) revenue, and (3) the English Label (EL) outlook in light of the new Genesis HMO product release.

The A2 Milk Company -1H25 Preview—Supply Chain News?

<ul><li>Kantar data for The a2 Milk Company's (ATM) 1H25 period is highlighting low-single-digit growth, with Q2 showing a solid sequential improvement in market share (primarily China Label [CL] driven).</li><li>This growth is slightly below 1H25 consensus infant formula revenue expectations.</li><li>However, given data volatility, ATM’s track record of exceeding Kantar's CL growth, and recent revenue gains in other areas (primarily MVM and Nutritionals), we don't anticipate material surprises in ATM's 1H25 result. </li></ul>

Kantar data for The a2 Milk Company's (ATM) 1H25 period is highlighting low-single-digit growth, with Q2 showing a solid sequential improvement in market share (primarily China Label [CL] driven).This growth is slightly below 1H25 consensus infant formula revenue expectations.However, given data volatility, ATM’s track record of exceeding Kantar's CL growth, and recent revenue gains in other areas (primarily MVM and Nutritionals), we don't anticipate material surprises in ATM's 1H25 result. 

The A2 Milk Company - Kantar Data—Looking for Improvement

<ul><li>The a2 Milk Company's (ATM) ASM trading update was modestly positive but hasn't altered our view on future earnings.</li><li>The key positive surprise was the initiation of a dividend policy (60% to 80% of normalised NPAT).</li><li>While we expected ATM to announce some form of capital management over the next 12 months, we expected this to occur around the time of a supply chain acquisition. </li></ul>

The a2 Milk Company's (ATM) ASM trading update was modestly positive but hasn't altered our view on future earnings.The key positive surprise was the initiation of a dividend policy (60% to 80% of normalised NPAT).While we expected ATM to announce some form of capital management over the next 12 months, we expected this to occur around the time of a supply chain acquisition. 

Australia

a2 Milk Company Limited produces cow milk which is free of a protein called beta casein A1.  The Company 
offers its products in Australia and New Zealand.

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A2 Milk Co Ltd (A2M AU)

The A2 Milk Company Wheying Up The Investment Case

Mixed is how we would describe our feelings heading into The a2 Milk Company's (ATM) FY25 result. Looking to FY26, with (1) a strong 2H exit run...

Forsyth Barr

The A2 Milk Company - 1H25 Result—More than Baby Steps

English Label (EL) revenue—particularly CBEC—stole the show, driven by strong execution in lower-tier cities and early-stage products, along with...

Forsyth Barr

The A2 Milk Company -1H25 Preview—Supply Chain News?

We head into The a2 Milk Company's (ATM) 1H25 result not expecting any surprises relative to consensus expectations or company guidance.

Forsyth Barr

The A2 Milk Company - Kantar Data—Looking for Improvement

Kantar data for The a2 Milk Company's (ATM) 1H25 period is highlighting low-single-digit growth, with Q2 showing a solid sequential improvement in...

Forsyth Barr

The A2 Milk Company - Milking It

The positive share price reaction has unwound ATM's material derate over the past month (on no news), and it trades on a fair ~24x PE.

Forsyth Barr

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